Last night’s Channel 4 programme, From Russia With Cash, has thrown the spotlight on money laundering and what agents’ duties actually are.

There is still a belief among some agents that all they have to do is check the ID of sellers. Not so.

In fact, all agents – in both sales and lettings – need to be vigilant and should apply that same vigilance to sellers, buyers, landlords and tenants.

Breaches can result in large fines or prison for agents.

We asked expert Michael Day, who has delivered courses on money laundering through his consultancy Integra to over 1,000 agents, for authoritative and up-to-date advice for Eye readers.

This is what he has written for us:

“Money Laundering Regulations 2007 arose out of the Proceeds of Crime and Terrorism Acts of 2002 and are designed to try and make life harder for criminals and terrorists to benefit from or fund their activities. There are estate agency specific (as designated under section 1 of the EEA 1979) requirements.

Money Laundering Regulations have, however, been seen by many agents as an administrative task forced upon them by the Government.

Many simply carry out a fairly casual check on the ID of sellers (often by obtaining out-of-date paper documents which get put in a file and ticked off as having complied with the legislation).

Often even this basic requirement is ignored in the case of companies or joint-ownership sellers.

There are six essential things an agent must do to comply with Money Laundering Regulations

• Register each office with HMRC
• Have a Money Laundering Policy statement
• Have an appointed Money Laundering Reporting Officer
• Have systems and procedures to comply with the regulations
• Have trained all staff
• Keep records for a minimum of six years

Just blandly complying with the above is however not enough, and estate agency staff are expected to be vigilant and alive to possible instances of money laundering and fraud by using their eyes and ears to identify risk and act upon it.

For example, take a situation I know to be common in estate agency where a buyer agrees to pay the agent’s fees instead of the seller, so that the seller will accept a price just below a Stamp Duty threshold, thereby saving the buyer money.

This is tax evasion and illegal, and falls under the HMRC remit.

Recent HMRC spot checks have caught out agents in London where they have taken sub-agency instructions from another agent and have not therefore got ID checks on the sellers. The lead agent may have done the appropriate checks but the sub-agent is left exposed.

Situations that seem “too good to be true” or suspicious, usually are.

The buyer who cannot explain where the cash for his purchase is coming from, the seller who is selling below market value without a clear explanation, the sale to a buyer who has never viewed the property (only via a “friend”).

The guy who walks into your office with a Kalashnikov rifle over his shoulder, a suitcase full of money and white powder around his nostrils may alert suspicion but the average criminal or terrorist is likely to be somewhat smarter than that!

Suspicious activity should be reported to the National Crime Agency by your appointed Money Laundering Reporting Officer. They will then advise you on what course of action to take.

Crucially, on no account should you inform the suspicious party about what you are doing. “Tipping off” is a criminal offence and likely to result in a jail term.

There is a massive potentially unlimited financial penalty for those estate agencies who fail to operate vigilantly, and fines of up to £170,000 have been levied on businesses failing to demonstrate the appropriate levels of professionalism and vigilance.

Serious offences could also result in a criminal prosecution and, on conviction, a jail sentence of up to two years.

Money Laundering compliance is risk based but I would recommend that a blanket approach is taken by agents and that they apply the same vigilant systems to sellers and buyers, landlords and tenants.

Online checking of identity can be done quickly and effectively through a number of suppliers. For example, traceWiseAML provide checks at just £1.50 per person that will also identify those with sanctions against them or who are politically exposed.

Estate agents cannot afford to ignore or be lax in their anti-money laundering efforts.

* For information about Michael Days money laundering and other compliance courses, call 01753 889287 or email msd@integra-ps.com